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MGM revenue increases beyond $12bn in 2019


Revenue at MGM resorts increased 9.6% year-on-year while the sale of the Bellagio resort boosted profits as the operator continues to pivot its business model away from property holdings.

However, the operator withdrew its 2020 financial targets due to issues in Asia.

Of MGM’s $12.90bn in revenue, casino made up the majority, at $6.52bn, up 5.0% year-on-year. Hotel rooms were the second-largest source of revenue at $2.32bn, while foot and beverages brought in $2.22bn, entertainment retail and other sources $1.48bn and reimbursed costs $436.9m.

MGM’s resorts on the Las Vegas Strip contributed just under half of the operator’s revenue, at $5.83bn, up 2.1% year-on-year.

Revenue from the MGM Grand Las Vegas and the Mandalay Bay Resort also declined, by 5.3% to $1.16bn and 2.2% respectively. However, MGM had greater success in its smaller Las Vegas venues, with revenue from the Park MGM Resort increasing 91.1% to $407.5m.

Revenue from MGM’s regional operations across the rest of the US increased 21.0% to $3.55bn thanks to the addition of the Empire City Casino in New York and MGM Northfield Park in Ohio to MGM’s portfolio. The Borgata in Atlantic City led the way among regional properties, bringing in $817.0m, down 1.3%.

MGM’s operating expenses, meanwhile, declined 13.1% to $9.08bn, mostly because of gains from the sale of the Bellagio. The Bellagio resort, which was sold at the end of the year but is still operated by MGM, was the largest driver of revenue at $1.34bn, down 1.7%.

MGM agreed to sell its iconic venue in October and form a joint venture with Blackstone Real Estate Income Trust, which lease the property back to a subsidiary of MGM Resorts for initial annual rent of $245m. This sale resulted in a $2.68bn gain, recorded as part of MGM’s expenses.

The operator’s MGM Macau casino brought in $1.58bn in revenue, down 8.3%, while MGM Cotai, also in Macau, brought in $1.33bn, up 81.8% year-on-year.

MGM spent $3.62bn on casino costs, its largest expense. General and administrative costs followed at $2.10bn, with food and beverage costs and entertainment, retail and other expenses costing the operator $1.67bn and $1.05bn respectively. Expenses from hotel rooms costs MGM a further $829.7m while corporate expenses came to $464.6m.

These costs resulted in operating income of $3.94bn, up 168.2% year-on-year. Removing the sale of the Bellagio, however, operating income came to $1.26bn, down 14.0%.

The operator paid a further $.109bn in financial expenses, up 30.9%. The vast majority of this came from interest expenses, which rose 10.1% to $847.6m.

MGM’s pre-tax income came to $2.85bn up 348.9% year-on-year. After paying $632.3m in tax, more than 12 times the business’s 2018 tax bill, MGM’s income came to $2.21bn, up 279.2%.

After accounting for net income attributable to non-controlling interests, MGM’s final net income totaled $2.05bn, up 339.7%.

In the fourth quarter of 2019, MGM made $1.63bn in revenue, up 4.4% year-on-year. Casino remained the largest driver of revenue, bringing in $1.63bn, also up 4.4%. The Las Vegas Strip contributed $1.43bn of this total, while operations elsewhere in the US brought in $899.9m. Operations in Macau brought in $727.4m.

Rooms brought in a further $566.2m in revenue, food and beverages $520.3m and entertainment, retail and other sources $362.5m. Reimbursement of expenses led to a further $106.1m of revenue.

Although MGM’s revenue increased for the quarter, Jim Murren, chairman and chief executive of MGM Resorts said the result was disappointing. Murren also announced his decision to step down today after almost 12 years at the helm of MGM.

“We are proud of the progress we made during 2019 as we took important steps to evolve our organization,” Murren said. “However, our fourth quarter results were below our expectations, primarily due to lower than expected hold, weakness in Far East baccarat, and certain one-time items.”

MGM’s expenses were heavily affected by the sale of the Bellagio occuring in the fourth quarter of the year. Without this sale, expenses would have come to $2.92bn, but instead they totaled only $242.6m.

Casino expenses came to $917.5m, with general and administrative costs at $557.5m and food and beverage costs at $407.3m. Depreciation and amortisation costs came to $331.4m.
These costs plus the sale of the Bellagio led to an operating profit of $2.96bn, almost nine times the profit in Q4 of 2018.

After a $337.8m net financial loss, MGM’s pre-tax income was $2.62bn, compared to a $98.5m profit in 2018. Overall, MGM’s profit was $2.01bn, compared to a loss of $23.3m in the same quarter of 2018.

Murren said that further attempts to monetize the business’s property assets to improve MGM’s balance sheets remain likely as the company moves to a more “asset-light” model. The operator announced in January that it also planned to sell the MGM Grand and Mandalay Bay resorts to the Blackstone-MGM Growth joint venture.

“Looking ahead, we remain focused on monetizing our remaining owned real estate assets, which we expect will allow us to invest into high growth initiatives such as Japan and sports, as well as continue to further fortify our balance sheet and return capital to shareholders,” Murren said.

However, despite optimism about the business’s future, the company opted to withdraw its 2020 targets due to weakness in the Far East market, which has been greatly exacerbated by the outbreak of the Wuhan Novel Coronavirus in the region.

“While we are encouraged with the long-term outlook in most of our key segments, and are especially pleased with our underlying domestic business performance, we believe it is appropriate to withdraw our 2020 financial targets,” Murren said.